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First-time Buyer

Interest rate cut to delay first time buyer purchases

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
16/08/2016

Almost a fifth of wannabe homeowners will struggle to build up enough of a deposit to get on the housing ladder following this month’s interest rate cut, a survey reveals. 

The research by MoneySuperMarket found that 18-34-year-olds currently saving up a deposit believe they need an average of £25,000 to buy their first home – 14% more than the estimated amount last year. But most admitted to only having around £10,000 saved, taking them an average of seven years if saving alone and three years if saving with a partner.

As the average UK house price stands at £211,230, first time buyers will actually need a £21,000 deposit (based on a 90% LTV) showing they still have a long way to save up that amount.

The findings suggest the average UK house hunter estimates they will be able to buy their own property at the age of 37, but regionally this differs:

  • Those looking to buy in the East of England expect they will be 42 before they buy
  • Those in the North West expect to be 38
  • Those in the South East are more optimistic and think they will be 36 when they get on the property ladder
  • 35% do not intend to buy their own home.

Kevin Mountford, banking expert at MoneySuperMarket, said: “The Bank of England dealt a blow to savers when cutting interest rates to 0.25 per cent this month and, as a result, first time buyers now face the prospect of having to save for longer due to dwindling savings rates. This is coupled with the general rise in house prices seen during the first six months of the year, even though prices dropped slightly in July.

“Savers shouldn’t settle for a miserly rate if there’s a better one to be found elsewhere, whether that’s via ISAs, bonds, peer-to-peer lending, or current accounts. The Help to Buy ISA is designed specifically to help those trying to get on the housing ladder and, when it comes into force next year, the Lifetime ISA can be put towards a property purchase. First time buyers should make the most of these initiatives.”